and. hello and welcome to cross talk i'm people of l. the day of fiscal reckoning is almost upon us by the end of this year the president of the united states and congress must come to some kind of tax and spending to avoid what is called the fiscal cliff is there the political will to find a compromise and does the u.s. risk its own fragile economy as well as the world's. to cross not the u.s. fiscal cliff i'm joined by edward harrison in washington he is the founder of

credit write downs also in washington we have mark levine he is a senior advisor with the truman national security project and in new york we cross to anthony rideout so he is the director of economic research for the reason foundation all right gentlemen crosstalk rules in effect that means you can jump in anytime you want and what if i go to you first in washington give us the magnitude of the fiscal cliff ok a lot is being talked about it what happens if we go over the cliff doesn't sound like something good to happen. there you know there are three or four things that can have been terms of tax cuts and spending cuts tax increases and spending cuts and the total if we were to do absolutely nothing would be about six hundred billion dollars in a fifteen trillion dollar economy quite severe it would definitely go into recession would be a severe recession it would be a very bad thing for the economy ok mark how do you come into this i mean hasn't the market price this into some degree. i don't think they've priced

into us going over the cliff i think they think i think most americans think a deal will be made eventually it may happen a day before christmas but i think we will come to a deal myself but we may not and there's a real possibility we may not particularly if the republicans don't budge from the policy they've taken for the last two years ok anthony where do you jim been on this well i don't think the problems are as severe as we're talking about or is largely talked about at least in terms of the direct impact of the fiscal cliff it certainly is going to have an impact on the economy having that much spending reduced certainly will have some kind of near term impact but because of all the other problems in the economy the fact that housing has been recovered the fact that private debt is continuing to put a lot of downward pressure. on economic growth that the impacts of the fiscal cliff will sort of be marginal so if we go into recession it won't be because of the fiscal cliff like per se it will be because of that combined with

a lot of other negative factors for the twenty thirteen post-election economy ok ed what do you think about that i mean is this going to be a game of chicken because we've seen this played before and we even though we've had an election we have the political status quo it remains the same. we game of chicken but let me go back to what they're going to say this is probably where we disagree we usually don't disagree we've talked before and i think that this is a serious matter in fact i think sickly speaking in the united states is an uptrend that is housing is starting to recover people who are actually indebted both agree that private sector debt is too high those people are actually starting to spend money irrespective of what we would call a balanced recession so the fiscal cliff would complete least short circuit that cyclical upturn and it would cause us to go back into recession and would be very severe especially because of the issues that it was talking about which will come

to a head once the fiscal cliff takes us over the cliff that is housing will become a problem and also the private sector debt will also become a problem but from a cyclical perspective right now those are really big problems mark is this going to be a political football i mean i said it's the status quo has been returned ok we have obama going back into the presidency and we have the republicans controlling congress and we've been through this before last year so what's going to change this time is somebody to blink someone has to blink. well of course it's a political football it's always a political football let's recall how we got to this mess to begin with the fiscal cliff it's not some hurricane it is something that was decided by policy makers the republicans threatened two years ago to default on the national debt and this is something america has never done and it's two hundred thirty years it would have taken us from being the safest nation to park their money to park for people to park their money to really being the unknown it would have destroyed the nation's

economy the world's economy would have had effect first century they forced president obama to agree the fiscal cliff as a way to get rid of the much more dangerous default on the national debt so of course it's a political football i do think the republicans have to back down this time though and the reason is not just that president obama won an astounding victory this week and that the democrats actually picked up seats in the senate and the house they didn't take over the house but the republicans i think do worse off the fiscal cliff than the democrats neither side wants it but the fiscal cliff happens if we get rid of the bush tax cuts it will be bad for the economy i don't dispute any of that what i think it allows republicans to do is to get out of their pledge they have made a tax pledge to people like grover norquist saying they would never raise taxes but the fiscal cliff does it automatically raises taxes then they can cut them in some way in between the current status and the fiscal cliff and they will never have broken their pledge ok what sounds very reasonable and to be where you come in and that's very reason to jump in there. well there's one thing worth more to say.

if i can jump in there for a second. i have to i have to agree with mark on one point i love to hear what anthony has to say about this i think it's completely irresponsible honestly we have this brinkmanship i remember exactly when it happened and you know one of the reasons in fact the u.s. government had a downgrade on its debt was because of the irresponsibility of the sort of brinkmanship the whole concept of defaulting just think about any other developed country germany japan and. any of these countries saying wow you know we're going to default on our debt because we can't come to a political agreement it's not that there's a solvency issue it's the fact that these people are playing brinkmanship and threatening to default that's just ridiculous ok a lot of things said there anthony you want to jump in there. yeah so the brinkmanship is certainly a problem in the the fact that it's we have a white house that sort of got stuck in

a capacity to not really know how to negotiate and the republican congress was sort of split between people who wanted to do a deal like boehner and the tea party which were sort of holding him hostage the fact that we wound up in a political position like that is really irresponsible and it's saddening it's not the way that we should be governing that being said if we're going to have some kind of grand bargain it can't be a grand bargain just for the sake of having a bargain and and john boehner coming out yesterday and saying that he wants to put a deal on the table he wants to go back to some kind of big trade between maybe raising some taxes and having long term tax reform is all well and good but i don't think that they're going to be capable of putting together something of that scope and that complexity over just the next couple of weeks particularly when we already have you know in my e-mail box this morning a dozen e-mails from various different special interest groups already saying don't go to a big bargain if you're going to take my you know my benefits or you don't go to

a big bar and if it means raising taxes at all it's it's incredibly complicated and if we just push for a bargain for the sake of a bargain i think we're going to wind up with something maybe worse than what we have right now it's a very clean mark if i go back to you that's a really good point i think they can go ahead go ahead joe jump in go ahead. i think they can do it maybe i'm a hopeless optimist but listen i've worked in washington i think they can do it because the pressures not to do it are too large let's recall they don't have to do this from scratch they don't have to design a grand bargain from the beginning baner and obama came very very close to a deal two years ago both sides had to walk away i think the outlines of that deal are there i think there is can bowles commission are there there are lots of close deals running around the parties are not as far apart as their rhetoric would make them see again maybe i'm just being an optimist but i still think they can do it yeah. ok i had a guy jump in anthony head one of the problems that i think that we have here is that it's. second one of the problems i think that we have here is different

parties want different things so what are we seeking to accomplish to avoid the fiscal cliff do we want to avoid any negative impact to the economy in two thousand and thirteen and is that always going to be the case because if that's so then we're never going to have an attitude that actually wants to cut spending because if you if you do poll fifty billion dollars out of defense spending for the next year that means there will be some jobs lost in defense spending and that won't be good in the near term but that's good for the long term so what's what is this attitude that we sort of like have in terms of whether or not we're willing to take a short term hits of the economy if it has long term growth is that kind of what we're seeking to avoid or are we seeking to fix the fiscal cliff and attach it to deficit reduction and sort of long term budget priorities or is it both i think there's different things that different people want out of this and that's going to complicate the whole negotiation process it's not particularly clear to me that the white house and the g.o.p. are on the same page with that they're even seeking to accomplish with avoiding the fiscal cliff and if they're not on the same page there i don't think that we can

get to a grand bargain maybe i'm a little bit more pessimistic than mark well it would if i can go to you i mean it's all about perceptions nobody wants to see to be seen to be backing down right i mean so it's this is this smoke and mirrors that you have to play with here you have to give the perception that nobody lost but this is politics somebody always does. it's true and you know there are three different i think there are three different things that people are looking at you know you have the one which is taxes you have the second which is deficit reduction and the third is just the general economy for two thousand and thirteen is and it was pointed out and basically you have to get all three of those things sorted out in any sort of bargain that you have nothing about mitt romney's position in terms of representing the republican position that he's the you know the guy who's the head. of the republican party in a sense because he was the nominee his position in terms of taxes exam is exactly

what you should expect the republicans to be gunning for in terms of the grand bargain so what they're saying basically is that we want lower taxes we're not going to increase any taxes but we will close loopholes and that's going to be our starting position for all of this there were the democrats and obama there saying basically we don't want to tank the economy in two thousand and thirteen and therefore we want to do something and will be stimulative to the economy and then at the same time you have the tea party which is saying we want deficit reduction how do you get all of that i think that you get it. dealing with mitt romney's position you also get it by looking at social security and medicare over the longer term which takes care of deficit reduction and also doesn't deal with the two thousand and thirteen the economy harm i think that's sort of the grand bargain there those are the outlines of the grand bargain ok gentlemen we're going to

a short break and after that short break we'll continue our discussion on the fiscal cliff today. today violence is once again flared up. these are the images the world is seeing from the streets of canada.

the mission in. free. free. free. free. free. free. free.

market. really happening to the global economy.

you. still. want to. welcome back to crossfire thank you to both remind you we're talking about the looming fiscal cliff. ok mark and i to go back to you in washington you want to jump in right before we went to the break go ahead but i want to talk about the bush tax cut ok go ahead mark first if i can put on my comments hat for a second here it's pretty clear what we need to do to help the american economy we don't want the fiscal cliff because in the short term we're coming out of the deep recession consumer confidence is the highest it's been since two thousand and seven

i actually think housing is making a turnaround corporations are very large profits wall street is up this is the time to come out so now is not the time to cut back to do spending cuts or do tax increases i strongly agree though that in the long term we need all of that so what you need is a short term deal that protects us in the short term but definitely does deficit reduction the long term that's the economists perspective the political perspective is where the cuts come from and that's where democrats republicans disagree republicans want don't want tax increases on the rich they don't want cuts in military spending democrats don't want decreases entitlement spending where the cuts occur is a political question but the fact of the cuts should occur this year but should occur two three four years down the road when the economy is strong that's an economics question and i wouldn't even mind tying that to the unemployment rate or something to make sure that we pay down the debt when we're strong enough to do so like we did in the late ninety's in the clinton years and what if i go to you i mean kind of on a variation of a theme here probably mean you know none of those that you would let me ask you

a head where hey hang on hang on you i mean when it seems to me that everyone on this program is being very reasonable ok very reasonable and it's too bad you guys aren't in congress ok. really but the fact is the rich. the rich don't want to pay taxes they'd like the bush tax cut ok this is what it's all about the rich the super rich don't give a damn one way or another about all these social spending they just care about themselves ok they want to keep their money and they don't want any more taxes ok they've benefited enormously from this tax cut ok that's what it's all about edward sorry. it's really it's one. of the first. no one wants increase taxes again increase taxes personally as well and so you know the question is how can you benefit the economy without increasing taxes i think you know from the republican perspective

let's just forget about the whole sort of moral issues of this about people wanting more the republican perspective as you know mitt romney laid out is that we think that we can actually grow the economy by reducing taxes and closing loopholes that's the republican position that's their mantra they're going to keep doing that over and over again and i think the question is is is that possible at the same time that you want deficit reduction and the answer is no it's not possible unless you cut military spending and social security in the long term if you care about the short term economy which is what mark was talking about so i think that's what's going to what's going to happen is we're going to focus on those issues for a longer term and we're going to try not to increase taxes over the short term and it's going to be political wrangling as to whether or not it's going to be entitlements or defense and i think that those going to be the sticking points anthony what do you think about tax increases on the rich not the middle class.

sure so i mean tax increases on the rich certainly would have a much more a smaller marginal impact in the near term than the annual tax rate going up to three thousand dollars and someone in the middle class but to push back on what mark are saying before i don't think that there's ever a politically right time to raise taxes to cut spending if there were always there are always going to be in a moment where where we sort of frame frame that up so you know let's say i think that the economy is actually on a negative swing unlike mark going to twenty thirteen but let's assume that it is in a positive swing at the end of two thousand and thirteen we're going to be in the same position where we're going well the economy still continued to grow it's still fragile going to twenty fourteen let's kick it down the road a little bit more that i don't think that that's a really sound or justified argument for not dealing with the fact that we have an out of control deficit over a trillion dollars and that needs to be addressed now not in the future markets to any political courage in washington for someone to make that kind of grand gesture

because i think anthony's anthony's probably right anthony is probably well it's always better to kick the can down the road and let somebody else take care of it look at the eurozone. look ever since ronald reagan in one thousand eighty s said that he could balance a budget increase military spending and cut taxes it's business position that we can have puppies and rainbows for everyone it simply isn't possible i think everyone in washington knows that but at the same time they're trying to promise everything to everyone they are politicians i do want to push back a little bit when you said peter the rich only want their money i tell you something it's very interesting not only to seventy percent of americans want to raise taxes on millionaires but fifty five percent of millionaires believe their own taxes should be raised so even the rich recognize that they're doing too well it's interesting the republican party is what protective millionaires then the majority of millionaires themselves what do you think about that i guess i sleaze just bleed the rich but you know when i was a faraway thing where there's

a neighbor's go ahead anthony going to have a time do i hear it's ok anthony go ahead to. so the thing with those numbers mark when you when the polls that you're citing that show numbers like that it's all the way that they actually phrase those questions because if you ask people what the tax rate should be the wealthy rarely do people just sort of like in the abstract where you really do people throw out you know a number like fifty percent or sixty percent there's always going to be a sense of taxes should be higher on the wealthy even if taxes were ten percent marginal tax rates for for those for millionaires or a ten percent people would say they should be higher if they're at seventy percent seventy percent of america would say it should be higher i don't think that citing statistics like that that that is really a sound reason for why we should raise taxes on the wealthy i think that we need a comprehensive concept of how we are going to tax americans how we're going to

fund the government and starting from a position of like today's status quo was a good thing and just trying to tweak up or down from there is incredibly problematic way to approach tax policy and where you want to jump in there i wanted to jump in to say that i think you know when we talk about tax increases or not really what we're talking about is which taxes and i think the real question is about fairness as well as revenue ultimately no one has a problem with the tax structure except to the degree that you know some people think that it should be flatter in terms of personal income tax the real problem i think the problem that everyone is pointing out here is the is capital gains tax and also the sort of interest carried tax that has benefited people like mitt romney and it's patently clear that it's not it's not a fair system much lower taxes on the that kind of wealth that kind of

income versus taxes on personal income where most people make their their their money and so what people want is they want to level the playing field they want those numbers to be the same and i think that that makes a lot of sense and what do you think that's what the american people voted for in the elections. you know one hundred percent i think that what people voted for what they said is that you know the economy's not agree. we think it could be better but you know we got into a hole and we're still digging ourselves out of this hole and the only way that we can dig it out is by instituting the sort of things that. barack obama was talking about and they one of the big things that he was talking about on the economic front recently is you know leveling the playing field basically and that means that you know get rid of this ten percent tax this. pain ten percent when you're making millions of dollars just doesn't wash in terms of people don't want that

mark where do you were cisco to go because i mean we've got obama coming back to the white house that could be more financial reform and we know wall street has been very very hesitant about that i mean this is the opportunity i mean does he really have to strike now or already as we mentioned before just kick the can down the road because he has does he have a moment is what i'm getting at. he has a moment but the moment that's in occur in the next month has nothing to do with financial reform there is a moment to do one thing between now and christmas and i'm going to take congress respects it's holiday season very much i know i used to work there after christmas but he's got this moment only to deal with the fiscal cliff he can't do a financial reform or anything else between thanksgiving and christmas we've got what three weeks maybe four weeks that's the only thing to be able to deal with and if they have to they'd rather kick the can down the road and then actually resolve something permanently whatever they get done they'll get done in these four weeks

anthony i mean it's a lame duck session of congress i mean aren't they are they get big could be hesitant to do this because they let the next congress take care of it. you know i actually think that if they're able to get through the complexities that the fact that it's a lame duck doesn't mean much because most of these players are just going to return in january most of the house of representatives the same the democrats picked up a few more seats in the senate and so. obviously it's the same white house. the players aren't really going to shift so it's just a matter of whether or not we do this now whether or not we do it in january and the only reason we would do it in the lame duck session is because of the stuff hits at midnight on december thirty first so i think the complexity is problematic and i don't know that they can get something substantive done on that front but the fact that it's all named i think that that's not as much of an issue and where it is both political parties going to give the american people a present before christmas i think that they will get

a deal done but i don't believe that they're going to get a deal done. that dials back the entirety of the fiscal cliff i think there will be a fiscal cliff let's if you call that basically i think that we're going to see the payroll taxes they're going to go away the payroll tax reduction and in all probability we'll also see increased taxes that are associated with the health care reform bill that are. scheduled to go forward so those two which are you know somewhat smaller in terms of the fiscal cliff i think those will have been and so i think there will be some impact on the economy mark of the last word in the program go ahead i guarantee you i carried to the last word as i guarantee you whatever happens it won't be pretty it'll go down to the last minute they'll be all kinds of severe allegations thrown back and forth december twenty second december twenty third you're trying to take away our christmas it'll happen all right i meant on

that note thank you very much gentlemen many thanks to my guest the deed in new york and in washington thanks to our viewers for watching us here are to see you next time and remember crosstalk. the book you can see. the old sofa you can. download the official ati application so for your language stream quality and enjoy your favorites from alzheimer's t.v. is not required to watch all its hear all you need is your mobile device to watch ati any time.

soon the old forms of the free coupon it's technology innovations all the rest of melanin stuff from around russia we've gone to the future or covered.